Arbitration Agreements Front and Center: United States Supreme Court Set to Resolve Ongoing Row over Legality of Class Action Waivers

As readers of this blog will note, we have previously noted a split among the U.S. Circuit Courts on the issue of whether class action waivers in arbitration agreements are legal or not: the Second, Fifth (see here) and Eighth Circuits have held that such waivers are legal (relying upon the Supreme Court’s holding in AT&T Mobility LLC v. Concepcion, among others), while others (including, most recently, the Ninth Circuit in Morris v. Ernst & Young, LLP), accepting the arguments of, notably, the National Labor Relations Board, have held that such waivers are not legal.  (In an opinion that is logically consistent with those of the other circuits that have held such waivers illegal, the Ninth Circuit in Morris held that Section 7 of the National Labor Relations Act (“NLRA”) and its promise of protected “collective action” renders class action waivers in arbitration unlawful—despite the lack of required “clear congressional intent” for the NLRA to trump the Federal Arbitration Act, as the Supreme Court discussed in AT&T Mobility and also in American Express Company v.Italian Colors Restaurant.)

Today, the Supreme Court granted a petition to consider, in a consolidated appeal, which Circuit’s position will prevail.

For employers, this decision to grant review, though not surprising, is absolutely critical.  If the Supreme Court agrees with the NLRB and invalidates such waivers, this would open up a window for class action litigation or class arbitration that had seemingly closed with AT&T Mobility.  This would clearly be a discouraging turn of events for employers.  Yet the current state of affairs is nearly as bad because of the degree of uncertainty regarding class action waivers: are they enforceable or unenforceable?  To say this lack of certainty makes managing employees and employment litigation difficult would be an understatement.

What comes next?  As Yogi Berra once said, “It’s tough to make predictions, especially about the future.”  This past election cycle has proven Mr. Berra correct. What we can say is that the current vacancy on the Supreme Court (and when it is filled, and who fills it) looms large for this decision.  Stay tuned.

Monte Grix

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